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Plummeting EU Carbon Market Bodes Ill for Clean Tech Investment

emissions red buildingAs carbon emissions allowance prices inch ever lower, it becomes less and less feasible for companies to invest in renewable energy, carbon capture and storage and other alternative energy means, observers say.

After the Copenhagen talks failed to reach a binding agreement, EU carbon prices fell to a six-month low of 12.4 euros Dec. 21, well below the zenith of 30 euros reached in the summer of 2008, Reuters reports. The Dec. 22 spot price was 12.16 euros, according to the European Climate Exchange.

Analysts say that sustained prices of at least 25-30 euros are needed to spur investment in clean tech.

Trevor Sikorski, director at Barclays Capital, said that carbon trading was “bearish for the market and bearish for the world,” reports the Financial Times.

If the EU had raised its carbon emissions reduction target from 20 percent to 30 percent, as some had speculated, the market likely would be trending upward instead of downward, because the EU would reduce the number of carbon permits allotted for free, according to the article.

Continued low carbon prices could result in higher energy prices, reports the Guardian.

If prices remain low, utilities that were tentatively planning investments in new nuclear plants and carbon capture and storage technologies are likely to put off the investments until current plants reach their natural retirement age. That is likely to put a squeeze on demand for power, according to the article.

Centrica, a UK utility, has called for its government to intervene by putting a floor on the price of carbon permits.

The voluntary carbon trading market in the U.S. pales in comparison to the mandatory EU scheme.

The Chicago Climate Exchange shows that prices have been steady at about 15 cents a metric ton for the past several weeks, down from nearly $1 a metric ton in July.

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